Skip to main content

tv   Key Capitol Hill Hearings  CSPAN  July 22, 2014 8:00pm-10:01pm EDT

8:00 pm
[applause] >> tonight on c-span2 the director of national intelligence discusses the threats to national security. ..
8:01 pm
reports shortly before the polls closed former governor and his first cousins watching party was simply saying i'm a little concerned our primaries have become out of control over allegations and things and i think we have to reestablish ground rules about the allegations that are reasonable. the story says he was speaking on the run of runoff cycle of te longest costly history that is that both businessmen and the representative jack kingston for an open senate seat. the next governor of the republican honcho says they argue that the system needs to be overhauled.
8:02 pm
the director of national intelligence said today that the terrorist attacks increasing and the former employer in florida spoke at an events to mark the tenth anniversary of the commission report. this is an hour and a half. [applause] well thank you very much. i apologize for being late. i'm sure you understand. i do want to thank the vice chair and the 9/11 commissione commissioners. the right thing to thank them for is the love of our country. that's been manifested obviously in each case in many ways but
8:03 pm
particularly the commitments when they were commissioners when that was going on, but even more importantly the sustainment of that commitment which i think at its root is another reflects the level of the country. and also, i feel obliged to support and thank them for the continued support of the intelligence community and our national security structure that. the past few days and weeks have been in tens with world events. so i appreciate the chance this morning to start by briefly and talk about the journey the intelligence community has taken over the past decade. like all journeys this is the one that is the work in progress. today we face the most diverse
8:04 pm
threads i've seen in my 51 years in the business. i started using that line in the midst of the arab spring events years ago and i'm still using it because it is still true end ofe terrorist threat to the united states is still very real and i will speak more to that in a moment. the threat we are facing are more diverse than they were three years ago or any time since i started in this business in 1963. in the recent world events they show how complex our challenges are. as the report that has been put out by commenting on the ten-year anniversary of the commission, the terrorist threat is not diminishing. it is spreading globally and it is morphing into more and more
8:05 pm
so-called franchises. the ridthe rise for a example if particular concern and the thousands of the foreign fighters who are gravitating toward syria and now returning to the countries of origin are of a great concern to us. so again just to repeat as the report the terrorist threat is not diminishing. and there are a lot that do not make headlines and i would cite for example those of us of her in the cyber realm and complicating the situation they've been working for what i refer to as a perfect storm. the factors that put into the capabilities. we lost intelligence despite what you hear or read we've lost the sources because of the source.
8:06 pm
we have made some policy choices that limit what and where we can collect. intelligence sharing become more difficult because of the damaged relationships internationally and also with domestic partners in the commercial sector. and to round out the perfect storm are the major significant budget cuts that we've taken in the last three years and are forecast to take more budget cuts in the future. the bottom line of the perfect storm and in my considered professional opinion is we are accepting more risks than we were three years ago or even one year ago. as an intelligence community.
8:07 pm
they are in much better shape to address the challenges in 2001. they are going to take due credit on the work of the 9/11 commission which i think has been critical for setting up the direction of the reform since 9/11. i want to quote a passage from the report which is the problem that we have in the community at the time and i was in it, so i know. the commissioners wrote the agency has cooperated some of the time. but even such cooperation as there wa was isn't the same as joint action. when agencies cooperate one defines the problem and accepts with it when they act jointly the problems are defined differently from the start. so, for the past decade since those lines were published with
8:08 pm
the 9/11 commission report as a compass and the intelligence reform and terrorism prevention act or the legislation as the map i think they have chartered of course integration and that has been my mantra since i started this job almost four years ago. in the summer of 2001, which the commissioners described as blinking red, we were disconnected as a community. the 60% of the workforce that we have hired since 9/11 came to the integration as a reality. they come to us as integration minded if i can use that phrase. rather than a distant vision of the future. and so, for my part they've been a huge impetus for promoting integration in the community. we are responding to threats on
8:09 pm
the operations that we wouldn't have envisioned 13 years ago. we evolved the targeting for example as a discipline tracking the digital terrorist with a massive volumes of information coming elusive signals and increasingly interconnected databases. we have found in our exploiting the value of the financial intelligence and threat finance. we found and worked to dismantle the infrastructure around him. over the past year we faced the sequestration and operational challenges as an integrated community. i must say i'm proud of the community and i will address the challenges and the great men and women we had in the intelligence community. as is an integrated intelligence community, we made decisions on decreasing the weapons, cutting entire programs and capabilities rather than just taxing for
8:10 pm
everyone to give the office base as we have traditionally done. as an integrated community we've made decisions to declassify more than 3,000 pages of documents deviously classified. the best way to deal with the misconceptions that resulted was ivy league to increase transparency. that is to take away from this whole experience has been the need for transparency. as an integrated intelligence community we face will eve faces in the challenges and now we approach the problems by bringing together individuals and different backgrounds from across to analyze the case and planned the management. we put our best and most appropriate resources up against the toughest challenges. now, none of this is to say or do overdo it on the cheerleading business to say that we are perfect. we certainly aren't.
8:11 pm
no complex organization can pose out thousands of human beings is ever going to be perfect. we have some serious challenges in front of us and so, to meet these challenges we have to reshape our capabilities. we are developing the systems in space and i think that is all i would say about it come up with thibut this is abig idea for in. and we are now using the cross community groups baking them integral to the whole system. the other major idea that i have to mention here is, which i don't think would have happened in the absence of the way that we are configured today is what is called eyesight. the intelligence community enterprise and for the first time ever we will integrate in a single enterprise the entire ic. this will take integration to
8:12 pm
the next level. and the objective here is for all of the intelligence agencies on the network and the infrastructure. and apart from the efficiencies that would be proven from this, saving money, reducing our dependence on a large cadre of it contractors it will both promote integration sharing and security with the security enhancements that we intend to build into this added a jumper to give the bumper sticker is to tag the people speak and audit the data and we can audit with whom we are sharing that data. of course this has obvious implications in the revelations. so, i started doing things like
8:13 pm
this for me is kind of genetically and typical and i'm sure the young jim clapper 150 years ago would be shocked at the way that we detail and now publicly talk about 2014. that this is indicative of the huge changes that are taking place with respect to transparency. we depend on the trust of the public and our foreign and domestic partners and elected representatives and the congress. in the congress. we can't do our job without that. and so, i believe that we are headed down this path regardless of the leaks in the past year. and i know that we are going to have to continue to be transparent as we go forward. but in truth, we will never reach the intelligence alone. as we push forward with integratiointegration we will me mistakes and fall short, but we
8:14 pm
will profit from and get better. so this intelligence integration is as i say a journey in progress. so, to conclude i want to thank the 9/11 commissioners again, those that are here and those that aren't for inviting me to speak and spend sometime with you and more importantly giving a compass to find our way forward in our integration journey. and i'm proud and humbled to represent the community and the men and women and that this morning. so, to the commissioners, thank you for what you did in the community ten years ago and thank you for what you continue to do in that spirit and thanks for your wisdom. thanks very much for having me. [applause]
8:15 pm
the next panel is going to focus on one of the last major recommendations of the 9/11 commission. simplifying and consolidating oversight of homeland security. that doesn't sound like the sexiest topic, but it is one that is important, and if addressed his soul to the needs facing the country. every nonpartisan group that has looked at this issue has come to the same conclusion from warning about the problem through to the groups on both the left and rightheright from heritage into brookings. everyone that has looked at this had the same thing this is a problem and we need to solve it. the most recent group to address it is the tas task force has jod that distinguished group and saying what the congressman hamilton in the country isn't as safe as it could or should be because we haven't reformed oversight and the department of
8:16 pm
homeland security. we care and placed an ad using that quote from the congressman showing only did the past secretaries about the oversight reform, but so does the who's who of the national security commission. the problem looks like this, the solution is going to be discussed by the distinguished panel. it's my pleasure to introduce gorman who is a reporter covering terrorism, counterterrorism and intelligence and she won the 2006 award for the washington correspondents to recover to the national security agency at a 2000 received a citation for the national magazine writing for the educatio education writing association. she will moderate the panel. >> thanhispanic thank you for jg us for our officially unsexy panel. [laughter] but congressional reform is probably the most high-profile reform that has never fully or at all then embraced, and in the
8:17 pm
ten year report looking at the current state of the play for the national security council commission says that there's been a proliferation of the committees that are now responsible for the counterterrorism and homeland security type of issues we are now up from 88 to 92. so i guess that is some kind of accomplishment that we will discuss. the report also highlights another congressional oversight problem into another realm that is too little congressional oversight when it comes to certain types of programs like sensitive intelligence programs, particularly as we have seen recently those that were highlighted in the revelations where we saw -- we have seen and are seeing significant congressional blowback to the way some of those programs have been conducted and the secrecy around them so we will be discussing problems of both too much and too little oversight as
8:18 pm
well as other issues with the distinguished panel including the ambassador who is the former ambassador to india during the obama administration and their managed a range of issues between the two countries including technology transfer, counterterrorism and nuclear energy. he is well-known as a former six term congressman from indiana and a former member of the 9/11 commission. he also served as the president for the center of the national policy and is now the senior director and strategic counselor worldwide and serves on the national commission on the future of the fbi. governor tom ridge is a former governor of pennsylvania and to serve as the first homeland security secretary said he has really done a lot of work on this kind of issues that we are about to discuss and he oversaw the merger of the 22 agencies and the 180,000 employees. after graduating from law school and he was drafted into the army
8:19 pm
where he served as an infantry staff sergeant in vietnam earning the bronze star, the combat infantry badge and the gallantry. he went on to serve six terms in pennsylvania. he is now the ceo of bridge global where he advises businesses and government on security issues and is a partner where we see sort of a pattern here that he founded with the former white house cyber security advisor howard schmidt. we also have kenneth weinstein who served as the homeland security adviser and we have the two former homeland security advisers and president george w. bush second term and prior to that he spent 19 years at the justice department including the first of the attorney general for the national security launching the national security division and also served as the general counsel at the federal bureau investigation. he's now the chair of
8:20 pm
white-collar defense investigations group at taft and is also a member of the directors advisory board on the nationaboard on thenational cour and a member of the public classification board and a member of the cia counsel asked him whextrawide advisory board e chairman of the panel of the national security advisory board so witboardso with that i thinke wanted to start with opening thoughts. it'thoughts. >> i'm delighted and honored to join with the secretary who served in his capacity as the homeland security adviser in the panel. and the fact that this is a boring topic -- >> we all agree. [laughter] dot commission said that the system was blinking red, hair
8:21 pm
was on fire and something terrible was about to happen. and then we outlined why that mistakes were made and how things could have been prevented. we now have seven different commissions and groups that hold of the congress you need to change and reform the way that you oversee homeland security or else something bad might happen. and now, we find ourselves five, ten, 13 years later congress has still refused to act. they acted to reform other agencies, other executive branch departments, and they have steadfastly refused change themselves. that must change. we say that very specifically in this report.
8:22 pm
second, we say it's important because the work they do commit the men and women that work up there work on committees that oversee the department of agriculture and education or the department of homeland security. and now with things changing so rapidly in the world taking over the world large swaths of territory and expanding the different countries around the world on a cybersecurity coming out with a speeding bullet every day, we need a department of that can act quickly and has a vision and a budget to take on these new threats, and is still the congress has different committees and subcommittees to oversee this. that is unsustainable. we need a smaller and integrated canopy. a committee with experts that can help set the budget and the
8:23 pm
vision for the department of homeland security as it enters to these threats and third it's important because as the congress may always different people come up to the subcommittees, we waste their valuable time. we waste the resources. we waste billions of dollars of taxpayers money and we hear the congress talk all the time about waste, fraud and abuse and how bad that is. here is a great example of waste, fraud, abuse and how congress could do it better so we are hopeful that by talking about it in these terms and having people especially like the secretary talk from his perspective on homeland security like this must be done now by five years from now or ten years from now after an attack by it
8:24 pm
must be now. hispanic it's difficult to add as my colleague just said but what we try to supplement his observations with a few of my own. this is the bipartisan policy center so i'm going to take a leap of faith, and on behalf of secretary johnson and the secretary napolitano, secretary chertoff and yours truly, my plea today is into you but to the leadership of the house and the senate, do something with regard to the massive inefficient, ineffective oversight procedures dealing with the department of homeland security. we speak with one voice across the board. republicans and democrats on this. and it requires leadership in the house and senate. it's structural and organizational.
8:25 pm
it is asked him pointed out i cannot imagine in my wildest imagination to a comfortable conclusion as to the ether eithr inability or the unwillingness of congress to reconfigure itself so that we can be more effective partner in the maturation of the department so we can be a more effective leader dealing with frankly the escalating threat environment from the physical to the cyber over which the department of homeland security has so much control and jurisdiction and i can think of only one reason and it's a turf. we both sat in the congress of the united states for 12 years. we would tell you that on the way to the floor after we vacated the hearings people would be expressing their
8:26 pm
profound distaste and displeasure. there are too many committees on monday to too many subcommittees i going for half an hour, 45 minutes particularly when c-span is there i do my thing and move on. they do not develop. there are not enough people to develop standards of excellence in the committee. that's not a criticism that is a fact of life. so what the bipartisan policy center is simply saying in a post 9/11 world where the threat has evolved both in terms of numbers of al qaeda organizations basically the connective tissue of al qaeda is now in about 16 different regions and countries and one could argue that the threat, the terrorist threat today is even greater than it was on september 11, september 12, 2001. is it a matter of the turf on the hill. there is an absolute in. it can maximize the efficiency and effectiveness of the
8:27 pm
department given its escalating role within the safety and security of the country to just think not about the turf that use it on and the kennedys that yoat the committeesthat use it e obliged to get into secure and that is the turf of the united states. it's not that it can't be done. it is about generating the will to get it done. and hopefully the public forums like this -- and if you think about it that can there be two or more influential people in the committee around then the governor and the congressman asked by the congressman of the united states to pull to together direct the nations and to tell us what you think needs to be done.
8:28 pm
we have military leaders at the law enforcement community there is a consensus, bipartisan consensus republicans and democrats all across those whose responsibility is to secure america to the congress saying you need to change your jurisdiction of the committees. it's too diffuse and desperate. as long as it stays that way you're going to have individual and i not think to say this or highlight anybody, but you will have people doing runs around the secretary. don't go to the hill because they have their own little relationships with committee chairmen and committees. it's time that they accepted the unanimous belief of people on both sides of the aisle to change the oversight. and i think the bipartisan
8:29 pm
policy center for allowing us to publicly exhort, plea, bag, ask him a demand. if you want to make america more secure one of the most important things that you can do is create a relationship between the congress of the united states and the new department. listen, it's still a new department. it's still maturing. they have work to do and if you want to make it effective to have to changhaveto change yourd committee structures. thanthank you. hispanic that is one of the most impassioned advocates. >> i guess it is really frustrating to me. the governor, and i say to myself congress and the u.s. to these men to assemble a committee and tell us what we need to do to make america saf safer. they keep saying it publicly. do what they recommended to do. the recommended to do. it's not that difficult.
8:30 pm
>> would you like to add something? >> ditto. [laughter] >> let me say thank you to the bipartisan policy center for having me. this is an important event and it is an honor to be included here. on the unanimity front, my own personal anecdote, i was asked to come out with the folks that are here today with a meeting last year and out in palm springs about the asking folks to talk about this issue. i am on about 35 different advisory boards and everything else in the city where we routinely gets together with folks from the views across the spectrum and we talk about things and there's always some high level of consensus, but then when you get down to the granularity, there is a little difference of opinion and that is the beauty. you are able to hash out the
8:31 pm
differences and come to a common ground. this is the first time i went into a session like that and we ended up with absolute unanimity not anonymity on every granular point we talked about on this issue. there was no difference of opinion. we have different ideas but in terms of the need to make this happen, it was absolute across the board and as for this group iv executive branch. branch. but my whole government career and executive branch usually i would be the last person in the world to be demanding or asking for in a comprehensive and effective congressional oversight. but in fact that is the plea i'm making as an executive branch person because, you know, i came out of the justice department where you have a pretty simple oversight structure you have the judiciary committee and it's pretty straightforward you know
8:32 pm
who they are and who you have to go to. you know you have folks like sheldon whitehouse that knew the issues that you were dealing with down to the granular level, and that meant that effective oversight that meant tough questioning and follow through and deep understanding on the part of the members about the mission and about us as individuals coming and that was a real oversight and i do not see that in the situation. and i get that it is not easy to rectify this problem. we have heard about the issues. my co. panelists can speak to this for the diversity of the issues that we deal with everything from the border control to the secret service, they have such a wide range of activities that the understanding of the oversight is not only just pulling together the challenges but pulling together the legacy jurisdictions into one or several places. but it is a subject matters.
8:33 pm
they are so diverse it's hard to put them in place. place. so we wouldn't diminish the difficulty of the challenge, but we do want to emphasize the need to meet the challenge. just to kick off some of the issues i can tell you firsthand when i was at homeland security advisor talking of the difficulty of answering the oversight demands for so many different committees that was a huge drain on the resources and i think a couple of years ago, there were media reports about how john thistle, the administrator of the tsa but declined the subcommittee on aviation because he said the department didn't believe that was the proper committee of the oversight. what it was or what it was and was a very telling event. john pistol was the most accommodating the fourth kind of guy that you would ever meet in the country. and when he got to the point i cannot adhere i have to do my day job and we really need to
8:34 pm
get the shop in order, that was the shortcut product out to the congress and the hope they heard it. so the other demand on time, there is also enjoying the resources there is also the diffused message the branch gets from so many different communities of oversight. getting the correct message in the congress where you should go and i think as michael said when you hear a lot of voices coming you don't hear any voices and that's true. it really i think means it has handicapped the department and that's critical when you have a relatively new department. and i think there is also issues of the lack of having a champion on capitol hill when the department has one committee or to committees and the department when it comes to an agency like the dhs when you think about it.
8:35 pm
and then the last thing i would point out is from the ambassador aambassadorat the outset. this legislation needs to get asked. we like to have authorizing legislation, but as the legislation needs to have this in the dhs like cyber. and the fact that we do not have the lines of authority on the deal with that issue i think that has led to what has been a problematic delay in getting the cyber legislation to which it is going to go a long way to helping us meet a very real threat to the national security. so the real-life implications to the future i agree it might not sound terribly sexy but it really is fundamentally important to the government. we can issue this as the dynamic -- >> getting a little bit more granular, how would you reshape
8:36 pm
the congressional oversight. are we talking one committee, to committees? how would it look and how would you get there if i'm able to start with him and move down the line. >> i don't think -- file we have recommended for the leadership on the 9/11 commission we have recommended a certain set of changes for the congress, i think basically this is going to be the congress' decision of the reform process. they set up the rules that would be voted on sometime in january. whether they reduce this to one or two committees in the house and in the senate they have to reconcile how that would work in the jurisdiction systems. we are not going to at this point describe directly where they should remove it. >> where do you think it should look personally? >> it should be a lot stronger. it shouldn't be 92. it should be a handful of committees. ideally down to one or two. it should have a number of
8:37 pm
people on it that are experts that develop expertise on homeland security and cyber issues as all three of us have talked about the changes are coming at us very quickly. people are over in serious as we have training and radicalizing. at the fbi they said just a few weeks ago there are scores of people coming back into the united states of america and listing the radicalization and this lawmaking skill what is the role in that and what is the fbi role in this and the intelligence community's role and if the congress isn't overseeing this and given the dhs specific authorities and the chick, nobody is overseeing this. so, america is vulnerable. we don't have any one committee this past legislation that is telling our new homeland
8:38 pm
security department with the role should be in this effort. experts, people on the committee that are devoted to this that spend hours every week getting to know these issues and going around the department of homeland security and having the appropriate oversight hearings, then the final point i would make is. this isn't like the committee that i sat on where most of the oversight is done publicly and we all know what reforms we are working on and what amendments need to take place to reform the public school system. we talk on the department of homeland security about very secret things.
8:39 pm
anand the sensitive communitiest the time that have to be protected. so, if we do not have the appropriate people getting to know those issues in space or wherever it might be at the nsa if those people are not doing their jobs and serving on the committee's year-to-year and knowing how to hold the executive branch accountable and having tough hearings on that windy overextend privacy issues, then nobody up here is doing this job. so, it is very important that we get going now. if they vote on a resolution in january with the new membership to take this issue on, that process has to start now. they are willing to give up the oversight and finally i would say tom mentioned the think
8:40 pm
tanks in town. we have brookings that has endorsed this on the left and hear it to job the right has come together and endorsed this concept. if they can do it in the think tank community why can't the congress do this if they come across the board? there are no excuses for not acting to this. >> think tanks don't. >> a couple things real quick to put in perspective for you in my success and interest have the same challenges. while i was the secretary we were conducting the war in afghanistan and iraq. and i was on the hill. frankly because the committee structure and the executive branch has been narrowed down over a period of time to make a general observation we still have a congress with which i was privileged and honored operating
8:41 pm
in the 21st century the challenges related to the united states federal government in the 21st century not just within homeland security but across the board cry out desperately for rethinking how the legislative branch exercises its constitutionally delegated authority. i understand there are different jurisdictions. if i could wave a magic wand i would probably have no more than two authorizing committees in the primary committee i would have a couple of select committees but because of the nature of the overlapping of
8:42 pm
jurisdiction, and again, the committee structure is archaic and antiquated and it's not terribly effective and we are not even going to go into why they didn't pay attention to what was going on in the va and whitey didn't pay attention to what was going on elsewhere. it's out of date and it's not really effective so i would probably if i could have my way have a couple of the subcommittees have been where oe you have overlapping jurisdiction with justice, somebody from the justice committee with the primary responsibility outside of the dhs would be a member of the subcommittee. so frankly it is going to take some thinking about who should serve and where. but at the end of the day you could interlock these other committees into the subcommittees that the departmentat the department,so e of that multiple jurisdiction point of view in the same structure. so, if i could have my
8:43 pm
preference would be one fairly large committee, multiple subcommittees, but you make sure that part of the subcommittees you had some overlapping jurisdictions or you could have a more complete look at the totality of the responsibility in the department. >> it appears the intelligence and armed service and the judiciary. >> just to add on to the ambassador said about the important steeped in the subject matter of what you do keep in mind for th that the oversight r the executive branch it is the committee and members who know how to ask the right questions and follow-up to get to the soft spots of the operations and find out where things can be approved. and you can't just do that as a member of talking points. you have to be immersed in the
8:44 pm
substance of what the agency does. i've done a lot with him and the justice department about the surveillance batters and he knew that area. chapter and reverse. so when he has to question in the hearing he has a question and i give the response i knew i was then going to get a follow-on question that whatever issue i didn't address in the questioning of the same thing when i got questions in the record or written questions so you had to prepare and respond differently than with somebody who would be a part-time oversight versus who doesn't spend a lot of time in your world because that person isn't going to do to ask those questions. so, i just want to sort of take it back to what oversight is. it's asking the tough questions to help the agencies improved. if you don't have the knowledge because you are not doing it day in and day out he lost no to answer the right questions.
8:45 pm
>> given the difficulty the congress has had to pass the legislation are we surprised that it hasn't embraced the measures that would also require the turf and is it realistic to expect that it could have been on the time frame. >> it is absolutely realistic to ask the people that represent our american people to do their jobs, to reorganize, to be a network fighting a network of terrorists. we don't need these massive bureaucracies here in the united states overseeing the committee structure and a terrorist group that can get into the country that are coming into the country as we speak. we know from what i said before the terrorists have gone to syria where there is an ink you
8:46 pm
cater training these folks into target of the united states of america. we know they are targeting the aviation system here and they are coming here. some of them are here and what does it take for them to realize we shouldn't have 92 different committees overseeing this thread of a few dozen people coming into the country. there's no excuse for this, there isn't and what a shame it would be if the next type of commission writes the report that says ten years ago they saw the failures in the executive branch in the agencies. they warned about that in the 15 years ago and the 9/11 commission warned about that.
8:47 pm
what does it take? it's realistic to expect the democrats and republicans to work together on national security issues to protect the country. it may not be realistic for us to think they are going to come up with a bill to agree on the abortion issue were agreed on the definition of marriage, but it is realistic to expect them to do this kind of job so we are hopeful that members on the of e house and the senate side will start to meet in august and september and maybe talk about their ideas for convincing the oversight and share their ideas with the different committee headheads and they will come uph some plans and maybe that's circulated in the fall and then the new members would vote on it in january and maybe there's a way to hold members accountable. it's a national security vote. it's not simply a vote about how the congress is organized.
8:48 pm
>> what do you see as the role of the executive branch in pushing ahead on this issue? >> writing as i try to articulate some of the executive branch has a strong interest in having the rationalized oversight or grand. and his folks are stating stata little time in the hearing they think probably it is duplicate if. i think it is incumbent on the administration to make this a priority to push the congress because the congress has to embrace it and unless they recognize publicly that this is an important issue and it isn't going to happen because they are going to have people pushing back hard so it has to be a public effort and they will be armed and turned with the push from the president and the white house to say this is important.
8:49 pm
so making this top priority in the conversations to congress. you mentioned in pushing this ahead what should they be doing. one, it is a national security issue. it is a national security issue. i don't think anyone would argue that the restructuring of congress after world war ii and the subsequent stretching from the department of the war to the department of defense has provided more aggressive and effective oversight of the dod. but that isn't an organizational much of this is a national security issue, number one. no one is arguing about the need for the oversight.
8:50 pm
we just all the leave the oversight should be comprehensive would be more effective if it was narrowed on the subject matter experts that could help the maturation and the development of this. finally writ large i would wager that if you took a private poll of 535 members of congress and ask them in their heart of hearts if they truly be leafed the committee structure in the executive branch was as effective as it needs to be or should be in the 21st century given the range of issues and size of the government, i have to believe most would say no it's not we are just going along to get along because that's the way that it's been. so we begin to make the changes
8:51 pm
in a 21st century infrastructure overseeing a 21st century government that is far more complicated and complex regarding the threats of the challenges and you need to think about the committee structure we are saying to the leaders it's a national security issue. i like that notion it's not a vote on the reorganization of the national security. >> i want to take a moment here to not refine the point because palm has madtom has made it mucn i could ever make it in his eloquent on the point when we look at the department of defense and the special forces and coast guard all the special
8:52 pm
programs we have armed services and defense appropriations and a handful of committees for we have the 80 billion-dollar budget. >> now it's gone up to that with 92 committees overseeing it. so you're telling me the department of homeland security should hav have eight times the number of the subcommittees dealing with the national security of the united states and the department of homeland security is dealing now with issues of radicalization, people coming into the country but also maybe some that are already here that are homegrown terrorists to the effect of what happened to the boston marathon bombing. they have a specific claim to
8:53 pm
help protect us from those globals. yet congress doesn't really know what's going on because there are so many people up there that are fighting for the jurisdiction and oversight. that has to change. >> you talked some to the cost of all of this. i was wondering if you could sort of rate the quality of the oversight of the homeland security at this point. the commission didn't do their report card this time around. >> i will look at it by comparison. i think the oversight of the justice department was quite effective. i was there for 18 or 19 years instead of working with congress as i said the judiciary and the intel committees. there was a vibrant, strong, aggressive the way that it should be coming and it was knowledgeable. and i think you don't see that when it comes to the dhs.
8:54 pm
i was dealing with it when i was the homeland security adviser and it wasn't any of those is. it's not because they were not members that didn't care a lot but it was a part-time occupation and that wasn't the focus of the staff were the exclusive focus of the staff or the members and that is an important point by the way. as a result it is the sort of watered-down oversight that you get and i think we've all been there to testify. note that you can get the sort of standard answer without worrying about the follow-up. and that is i think that might be the particular exchange. you are not going to get asked questions. and yes, keep in mind he's our
8:55 pm
people that the oversight is just one of them and unless it makes itself really the principle and that official is going to get short so there is a cost both to the oversight service of the congress providing the american people. it' >> how would you rate the quality of oversight by the congress at this point? >> they can choose quantity with quality. >> the point of my colleagues have made is legitimate. there are talented people on the hilhill on both sides of the aie and i do believe. to a certain extent they would
8:56 pm
develop very specific subject matter expertise. i think at the end of the day while i add that homeland security is one of those agencies is multitasked is a border agency about goods and people going back and forth across the border. you also worry about immigration. you also worry about natural disasters. you also worry about cybersecurity at a critical one for structure and certainly worry about the ongoing terrorist threat but they are all related to the border. so there is an epicenter of focus that i think really is itself to the aggregation of all of the right group rights groupe department. but when you suddenly diffuse oversight across multiple jurisdictions, you lose the sense of urgency and in my colleagues point of view under the notion that on a day-to-day
8:57 pm
enday-to-dayand month-to-month u begin to develop the expertise to ask those follow-up questions they turn it over to the staff member and i'm speaking very respectfully of the staf staff t the point that you made you need aggressive oversight. the executive branch welcomes and the constitution requires it and demands it and suggested, but you don't get that. i think again at the end of the day with large of the executive branch is antiquated we are here talking about homeland security, but i think the congress and the aftermath of 9/11 confused the quantity and it's tough not to give jurisdiction but there's plenty of jurisdiction in the other areas to make the committee chairman happy. >> although that should not be the function of the leadership to make the committee chairman happy. it should be to construct the oversight capability.
8:58 pm
i would agree with the criticisms and the evaluation of my colleagues have that as a former member of congress and someone who loves the institution of the congress. one of my dreams growing up here in indiana was to someday run for congress and represent my hometown community in this wonderful city. and having lived abroad to represent the country to a billion people in india so proud is an exceptional place when we look down the road and we think about what their jobs are to give up the turf and to serve on one less subcommittee and move
8:59 pm
from serving on six to five or 423, for our national security -- not to be a tough call. so i think our oversight when it doesn't have been its sufferers. our security suffers. our safety as a country suffers because they are not acting on these things. and in that report, giving too many other areas the congress needs to act on an addition to the oversight and the organization of oversight of the department of homeland security. we talk about developing a new authority as to how we send our troops and men and women into war and updating the 2001 resolution so that that decision reflects the american people's interest and their opinions. spee..
9:00 pm
working with the intelligence committees, and i was struck when i was talking with the congressman a couple of days ago. he said that, you know, having follow-up he concluded that congressional oversight of these surveillance programs has not been robust enough. i was just curious what your sense of that is.
9:01 pm
>> that obviously is an issue that has come to the fore because of disclosures. it is -- you have to look at the fundamental tension and problem, which is this. intelligence communities are tasked with a very difficult job , being the ones to day-to-day look at these highly classified programs, assess those programs, and do so without those programs being disclosed to the rest of the world. if you look at some of the programs that have been controversial in the wake of the snowdon disclosures like the telephone matted data program where all the information was gathered and held by that government and searched for indications of terrorist activity, that is the one that has caught the most controversy. it was completely classified. you had the intelligence
9:02 pm
community being briefed about this. you had intelligence communities themselves not able to talk about it more broadly. i think the senator raised that concern before. and that is a problem. if there is no way around it, frankly, because, you know, there are large parts of our surveillance, if not most of our surveillance, that need to be done in total secrecy and cannot be disclosed. but it does raise a concern. how does the public have confidence that oversight is being done effectively when they cannot see what the oversight is, whether tough questions are being asked, whether congress and the body of the intelligence committees are asking about how are we calibrating this balance between liberty and privacy -- on the security and privacy. so that is a tension that will
9:03 pm
always be there. i will say, though, i think one of the lessons of this whole post snowden situation is that is incumbent on the executive branch to disclose more, if they can, when they're is a program that can be disclosed to do so and not have what i think is a reflexive reaction that we need to be careful not to disclose anything. one piece of information out might lead to more. the slippery slope. it is a viable argument. recognition that the more the public knows about these programs the more basis they have that they have confidence that it is being done appropriately. in the absence of that knowledge there is an absence of that confidence, absence of trust, and doubt about the oversight. and -- >> do you agree it is not robust
9:04 pm
enough? >> i always agree with the congressman. he always has had the wisdom and insight and i associate myself with the gentleman from our home state of indiana. when we talk about oversight we are talking about convincing, reforming, streamlining the department of homeland security and oversight in congress. it is a very different issue than the intelligence committee. one, it is finding numbers. this is called the select committee, not caught the select community because hopefully because the leaders go and pick specific people that they know have an expertise in national security that are going to devote significant time before committee hearings and after committee hearings, that these people are going to travel not
9:05 pm
just to langley or the farm or nationally but internationally to visit other chiefs of station and see what issues they are dealing with overseas. these people are going to serve on these committees and develop a sense of expertise and devotion to issues. they are going to penetrate and ask tough questions about issues. why is there this problem with over budgeting on this particular set of systems that we are buying? as a hypothetical, why is that happening? who do we get up here to have accountable answers given? how do we do staff work to make sure that the right questions are asked and followed up with after we have the secret hearing and i do not get the sense today that that kind of thing is taking place by all members of
9:06 pm
the senate and house committees. and i would further say -- >> enough of the members? >> i would like to see more members participate in that kind of dedicated fashion which is, again, why you cannot have six or seven different committees that you serve farm. if you are truly serving on the committee you are replying to a peak on to win three or four to develop the time necessary, to travel, study the issues, oversight. and i would say -- lee and i have talked about this. it is not only a function of all we just talked about, getting the right people, bipartisan staff working on these issues together, but it is also, you know, terribly important that the executive branch breed all members of the committee and don't keep narrowing down the briefings to the gang of haiti, a gang of four, they can get to.
9:07 pm
members on these intelligence committees which are supposed to be selected -- you know, 25 members of the 435 where a dozen or 15 of the senate from 100 are picked because there is confidence in these people that they represent the entire -- very, very top-secret information. >> to you feel they are currently representing the entire body? >> to you feel they -- do you want to answer that question? >> we are about to go to q&a anyway. >> i think in both the department of homeland security side and on the intelligence committee when need to vastly improve our intelligence oversight capabilities. it takes them. >> i just want to make a quick comment here on behalf of the department which i was privileged to help form and lead .
9:08 pm
homeland security does not generate its own intelligence folks. it can be held accountable for intelligence failures and have been blamed from time to time when those things have happened, but they rely on of the alphabet agencies to get them the information. i just want to make that known to everybody. this notion that somehow the secretaries have a little bit of competitive intelligence capability but by and large still have to rely on the alphabet agencies in order to make decisions about disseminating information or acting on relevant and timely information. i throw that out there as an anecdote. i think economic pretty strong case, twentieth century structure , a much larger government. an argument could be made that the select committees on
9:09 pm
intelligence might be the only committee you sit on where your burden to serve in other committees could be substantially reduced. that is the nature of the world we live on and is probably -- argue about important jurisdictions. one could argue if you accept a committee assignment on the intelligence committee perhaps that ought to be your reason for existence for the years you are on it. just a thought. keep going back to twentieth century government, 21st century oversight, 21st century government, much bigger government, more complexity and challenges and we still have jurisdiction the same way. it does not make any sense. >> next question. >> my name is elis got -- and
9:10 pm
eli scott. i do believe it oversight and transparency go hand-in-hand. having worked in the army intelligence three years, i think will tend to loosely used national security classified documentation when they should not be classified. up perfect example, 9/11. we have had a number of document classified which cost the family members not to get a complete picture of what happened on 9/11 i would like to ask, how would you rate the classification of the documents during 9/11? i also ask the two gentlemen
9:11 pm
from homeland security, how would you rate the transparency of homeland security? thank-you. >> thanks for your question. nice to see you here and a thank-you for all of your great work, not only helping on the 9/11 commission but on the pentagon memorial for 9/11. i think you bring up great points. a first of all, i think one of our recommendations -- i know one of our recommendations in the report today is about transparency and the encouraging the national archives and executive branch to release more and more of the documents from 9/11, to have this transparency and this openness so that the american people have even more access to what we found and why we made the recommendations we did. and so we make a very, very strong set of recommendations here to change that process and open up the system.
9:12 pm
secondly, over classification, we also have seen that there is tendency in our government to over classify all kinds of different of formation. and that really hurts us in many ways. when we talk about sharing information, sharing information across government, or is obsolete, but when the federal government, departments, breaking down silos and vertically to local and state officials in making sure that they get information and pass it back to the federal government. when we over classified information, say it is top secret and it probably is not, those local authorities , oftentimes, could not -- and maybe they don't get access to a critical clue or something that they could pick up. i think that is improving, but i know in our recommendations that we continue to recommend changes there.
9:13 pm
>> i think it is really a very important question. in spite of what happened on 9/11, you still have an institutional bias based upon a cold war mentality. it distributes information on an need to know basis. by and large, a lot of these have decided that you don't need to know until we are ready to tell you which is not exactly the barometer that i think is appropriate. i think over classification is a way to shield information, a reason not to share it, and even in my time in government, and i would defer to my colleagues, i have seen secret or top-secret documents that if redacted in a certain way the information could be shared with regard to transparency without divulging sources and efforts. we are looking at this section of classified and over classification as critically important going forward. secondly, there is word missing in this conversation between the
9:14 pm
federal government and the rest of the country. that word is trust. even if you have secret and top-secret information it is beyond belief that somehow we cannot figure out a way to share that with either the governors or the homeland security and visors or other people out there on the ground because you cannot secure the country from inside the beltway. unless we are sharing more of this information, secret or top-secret, and just people who get it that they will not leave it and not necessarily act upon it, and we will never match applies to of maximize our ability to defend ourselves. i want to inject one more word into this conversation. the classification system. do not use it to withhold information, and cannot be so reluctant to share even that kind of affirmation. i do not want to hear about leaks.
9:15 pm
there is no town that leaks more than washington d.c., so do not tell me you are people out there who have day-to-day responsibilities for the safety and security of friends and neighbors and their communities. at some point in time the folks in this town have to be more trusting of the people who wear the same uniform of public-service whether law-enforcement community, homeland security, we have to start trusting one another if we will ever take it had to evolve the intelligence we have to it in a position where we can be preemptive rather than reactive. >> an excellent question. i think it there is one thing, one issue that is less sexy than congressional oversight it is over classification. [laughter] i am actually on -- one of the things from the beginning, i am
9:16 pm
on the declassification board devoted to addressing this issue. we consider ourselves sexy, but i guess not a very sexy topic a fundamental problem when you are writing a document and you have concerns about whether it might have information whose release can be damaging to the national security. people tend to err on the side of classifying. and so it really requires a comprehensive, all-out effort by the executive branch to push back against that human nature. the president when he came in issued executive orders addressing this issue. there has been a lot of talk about it. as much as we can generate by your reports and public discussion of this issue, the need for making sure there is not over classification, you
9:17 pm
will need to get a groundswell to push back. it is really just a function of human nature. >> i think we need to go from need to know ten need to share. it is another world to make different world. >> we will go to the commissioner. one thing that was mentioned a couple of days ago when talking about this report, and the commission documents and papers still remain classified, including a chunk of their report on the national security agency. he said that he did not believe any of them needed to be classified today. >> so this has been an extraordinarily articulate discussion by my pals year -- here of the myriad reasons why we need to reorganize and reform congress. ten years ago we said when we
9:18 pm
made our recommendation that it would probably be the hardest of all our recommendations to realize. we were right. we are not paying smug about being right. we are unhappy about how right we were. so the question i have, and i will direct it first to governor richard, 80 you're extraordinarily candid and articulate exposition of why turf is the primary reason for their resistance to a sensible reorganization reform, the homeland security issue, national security component of to why we are not only wasteful
9:19 pm
but counterproductive in the current regime, can you unpacked what it means for there to be a tariff issue that seems to be resistant to reform and how we, as citizens , can force accountability for the refusal to accept these recommendations which we have made and reiterated and reiterated again with support from all of that different advocates we talked about. >> i did not articulate it as well as you just did. thank you for your kind words. i think in terms of almost
9:20 pm
historical inertia upon the hill over decades. it our committee has always had jurisdiction over these issues. natural instinct to preserve it. i do not think the institutions of government are different than institutions of the private sector or us personally. change is difficult to. change is very difficult fundamental change in your life. having said that, that explains it. it does not justify it. and i think the point in time -- i just doubt very seriously if you will ever have to many chairmen regardless of party affiliation, regardless of the chamber who are willing to relinquish jurisdiction they have had. it is at that point in time -- and i think this is where maybe you are going with the question
9:21 pm
-- how do you activate the body politic to affect the change? i cannot think of anything better them while we are doing now with multiple agencies and groups and think tanks that continue to put pressure on the congress. ultimately i think it comes down to five people, maybe for. of the leaders in the house and senate to of both parties. at the caucus letter of -- level. ladies and gentlemen, we have met. we are in a bipartisan agreement easier said than done. i think this is an issue of leaders. i think, as i said before, i think most men and women in the house and senate will tell you they respect the committee structure. i cannot believe they feel fulfilled given the level of their engagement spread across
9:22 pm
multiple committees in jurisdictions that they are actually doing their job as effectively as they would like. i think you need support from the white house. there are four people need to affect these changes post november before january. >> is there a fund-raising component? we know how much time spent on fund-raising and the congress by individual members it is a constant demand on their time and energy. and it is there a fund-raising component that is associated with failure to organize and streamline oversight on homeland security? and let me in a second question coming from the families of 9/11
9:23 pm
victims, whether in your view 9/11 families could, again, be active proponents for change on the congress if they work to organize and again rededicate their efforts to this issue? >> a couple of quick short answers. one, i understand where you're coming with regard to the fund-raising component. i don't think that would have any effect. i think galvanizing and around this important issue would have far better and greater effect. >> i like that a lot. i don't think there are any questions like that. >> if i could answer both your questions, i think there is a fund-raising a fact because of the bandwidth on almost everything that happens and if a number out of a 24-hour
9:24 pm
day is spending six hours a day fund-raising and two hours a day in oversight hearings, is that they're right ratio that we need to protect our country today? it would be interesting for some of the media to do a survey about members of congress. how much time is spent in committees, not just a markup of the bill when you have to be there and votes are recorded on amendments and final passage of a bill. how many hours are you in that committee when they are doing the oversight of how the department of homeland security is working these things and what problems are encountered? do you have three members in that hearing for the entire time, or do you have 20? i would be very interested to look at that. let me go back to your first question. i think three things need to happen for this to pass, and i think it is passable. first of all, it needs to be
9:25 pm
defined as a national security issue. it is not a reorganization of congress issue, not about turf but what we do to try to make sure that our committee structure is appropriately aligned with the threat to and with the solutions in america today. and 92 subcommittees and committees does not do it. way too many. it is wasteful. the second thing that needs to happen is third-party involvement. the 9/11 family members should be involved. there should be groups that will reach out to the leaders and tell them we want this to happen for national security reasons. i think, you know, it needs to
9:26 pm
be focused on the leaders. but if they are hearing from other members in the senate and house that they would give up jurisdiction, give up subcommittee, and tell the leaders they are willing to do that, this may happen. this has a better chance. lastly, i would say the great thing about our system in america is when the people way and. not just the third party interest groups, but the people, c-span viewers. if they call and say, we are not point to take this anymore. we want congress to do its job. we are not point to re-elect 90 or 95 percent of the congress if they are not doing basic national security issues. they called the hill and we in. that is probably -- if they will do that i think you could see a bigger chance for this. >> a great point to end on.
9:27 pm
thank you. i am sorry. we have run out of time. happy to take your question off line. unfortunately we do have to move on. before we do so i want to make a few comments. understood. i apologize. happy to talk to you offline. i do need to wrap up. [inaudible conversations] >> happy to talk to you. okay. i did not know you were a family member and tell you showed me this time. happy to talk to you offline. >> appreciate that not everyone is getting an opportunity to speak. thank you for volunteering. i think that we are probably all happy to participate alongside our c-span2 commissioner frans. with that, i would like to recognize a few people in the
9:28 pm
audience to have made all of this possible. without a permit would not have this project, and i am grateful for her support i would be remiss if i did not talk about all the people who made today and this report possible. jacob clark, ashley mccormick, kristin madding sleep. we thank you for all of your hard work. homeland security program, michael garcia has been invaluable. thank you. and, of course, i have to ethnic bbc director of communications and her incredible team. it added brandon who has been communicating with the press to make sure you knew about this. she put together this report and made it possible. at this point, i am happy to break for lunch. it is directly behind me we will
9:29 pm
pay coming back together to begin the next part of our program. thank you all. [applause] [inaudible conversations] >> we talk with house intelligence committee member jim hines about some of the intelligence gathering challenges.
9:30 pm
>> forty years ago the watergate scandal led to the only resignation of an american president. we revisit 1964 and the final weeks of the nixon administration. the charge of abuse of power. >> what you have here are questions about what the framers had in mind, questions about whether the activities that had been found out by the committee and by the senate, watergate committee work, and become impeachable and thirdly, can we prove that richard nixon knew about them and even authorized them? >> watergate 40 years later sunday night at 8:00 eastern on
9:31 pm
american history tv. >> at a senate hearing today economists talk about the practice of inversion wear corp's merger with a company based overseas to avoid paying u.s. taxes. the president recently called on congress to pass legislation to prevent this corporate tax strategy. this is an hour-and-a-half. [inaudible conversations] [inaudible conversations]
9:32 pm
[inaudible conversations] >> the finance committee will come to order. the u.s. tax code is infected with the chronic diseases of loopholes and inefficiency. if these infections are hobbling
9:33 pm
america's drive to create more could wage red, white, and blue jobs here at home they are a significant drag on our economy and are harming u.s. competitiveness. the latest outbreak of this contagion is the growing wave of corporate inversion where american companies move their headquarters out of the united states in pursuit of lower tax rates. the inversion virus now seems to be multiplying every few days. many deals have either occurred recently or are currently in the works. proposed $42 billion merger record-breaking when it was announced in june, but the ink
9:34 pm
in their record books had barely dried when a there was an announcement on friday to require -- to acquire a share for almost $55 billion. according to the july 15th edition of marketplace -- and i am going to quote here, what is going on now is a feeding frenzy every investment banker now has a flight deck that they are taking to any possible company and saying, you have to do a corporate in version now because if you do not your competitors will the congress has been aware of the conversion virus for a long time. in fact, it passed legislation purporting to solve the problem a decade ago. but the underlying sickness continues to gnaw away at our
9:35 pm
economy with increasing intensity. the american tax code is an anticompetitive mess. accountants, lawyers, and a fast buck artists looking for tax shelters feed off of it. this mess is driving american investment dollars overseas. and according to the joint committee on taxation it is costing american taxpayers billions. on a bipartisan basis the finance committee must respond now. first, let's work together, colleagues, to immediately cool down the inversion fever. the inversion loophole needs to be plucked now. second, let's use the space created by the immediate steps to apply the indisputable
9:36 pm
alternate queue work, comprehensive tax reform. now, i have not -- nine long years of sweat equity in that cause of tax reform. with former and current senators we have produced what still is the senate's only bipartisan federal income tax overhaul in almost 30 years. now, i would be the first to say that senators here have differing views about how to go about enacting tax reform. let's, however, recognize that what really counts is that the finance committee is not back here once again discussing in vergence a decade from now. comprehensive tax reform has to happen soon. the outbreak of inversion shows that without curing the disease once and for all the illness is going to keep playing the american economy. it is going to get tougher to create those good wage red,
9:37 pm
white, and blue american jobs. our tax base is going to keep the road. investment will be driven elsewhere. the finance committee invited a number of ceos to join our discussion today. none accepted our invitation. i hope that these executives will soon change their mind and be willing to answer questions that finance committee members have about this issue. the fact is, without immediate, comprehensive tax reform and antidote to the inversion virus is needed now to protect the american economy. this wave of convergence may beat it for shareholders and investment bankers and private equity firms, yet the barack is bad for america. america's free enterprise system is at its best when they're is a
9:38 pm
level playing field. and in vergence bestows tax favors on some parties that a further distorts the free market absent tax reform being enacted immediately, colleagues, what happens if the inversion virus least 20 more in versions over the summer? many to this point have happened in the medical field, but the "wall street journal" just reported that there is evidence spreading to manufacturing and retail. how many more infections can america's economic body indoor? global markets are expanding. stockpiles of cash overseas grow at record levels, foreign competitors get more aggressive and chomping at the bit to get a deal on the backs of the american taxpayer. it's time for action is now. our committee needs to move on a bipartisan basis to close the loopholes that are fueling the growth of the inversion virus.
9:39 pm
then the finance committee needs to cure the disease once and for all with comprehensive tax reform. i just want all colleagues to know that i am going to be working with each of you on a bipartisan basis to accomplish both of these tasks. let me recognize my colleague and friend, senator hatch. >> thank you, mr. chairman. appreciate you holding today's hearing. i think we can all agree that addressing the shortcomings of the national tax system is a critical step on the road to a comprehensive tax reform. as we consider reforms to our tax code, primary goals should be to make the u.s. a better place to do business and allow american companies to more effectively compete with foreign counterparts in the world marketplace. when it comes to our international tax system much of the attention gets placed elsewhere. for example, in 2013 there was a
9:40 pm
launch of profit shifting. while we appreciate the efforts of that bringing tax authorities together many of us have expressed concern that the best project can be used by other countries as a way to increase taxes on american taxpayers. the issues under negotiation are complex and can have far- reaching and negative consequences. though i think we should be willing to work through these issues until an international consensus is reached, we should not be rushed into accepting a bad deal just for the sake of reaching an agreement. we are right to expect the treasury department will aggressively represent american employers and their workers in the negotiations while responsibly consulting with congress as discussions proceed hopefully. in the end the focus of this discussion will return to base erosion principals instead of ways foreign companies can raid the foreign treasuries.
9:41 pm
of course while negotiation is important, the most high-profile international tax issue today happens to be corporate and version. it seems that almost every day we are hearing about a u.s. multinational opting to convert to a foreign jurisdiction. as i have said publicly i am concerned about these corporate in versions. ultimately the best way to solve this problem would be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts. that would mean a significant reduction in the corporate tax rate and a major changes to make our international tax system more competitive. over the past few months we have seen a handful of alleges that the proposals to address the issue. ameristar punitive and retroactive. rather than incentivizing companies to remain in the u.s., these bills would paddleballs around u.s. corporations in order to keep them.
9:42 pm
i think that is going to result in the results that no one wants. this approach completely misses the mark. while it may put a stop to traditional in versions, it could lead to more as our u.s. multinationals live under this approach can become more attractive acquisition targets for foreign corporations. whether it is traditional corporate acquisition in version or reverse there is always the same continued stripping of the u.s. tax base. the approach of the legislation is so misguided it reminds me of an old joke. a drug is looking for something under a streetlight. a police officer walks up and asks what he is looking for. the trunk says, my keys. the police officer helps him look for a few minutes without
9:43 pm
success and finally asks, did you lose your keys here? no, i lost them across the street. the officer responds, why are you looking for them on this side of the street? he replies, because the light is better over there -- over here. once again, the answer to this problem is to reform our tax code. however, as i have said publicly , there may be steps congress can take to at least partial -- partially address this issue. i am open to considering alternative approaches although i have stipulations as to what proposals i will consider. for example, would never approach we take it should not be retroactive or punitive and should be revenue neutral moving as toward or at least not away from the territorial tax system and should not enhance the bias
9:44 pm
to foreign acquisitions. most importantly not impede the overall progress toward comprehensive tax reform. toward that end it should not be inconsistent with house collins approached. they're is a growing consensus to use corporate conversions has a political wedge issue in this election. in fact, i was recently the recipient of a letter from treasury secretary on this position. i hope that is not the direction we take if we want to accomplish something on this issue. we will have to work together. as you can see, we have a lot to discuss today. i want to thank you for holding this important hearing. >> thank you very much, senator hatch. let me reiterate i am interested in working with you and our colleagues on both sides of the aisle to address both of these issues, the immediate challenge we are facing with this growing
9:45 pm
in version virus and, of course, the ultimate cure, comprehensive tax reform. we now have six witnesses. our first is mr. robert stack. it -- our next witness will be mr. pascal saint-armans. our third witness will be dr. mihir desai. our fourth witness will be dr. peter merrill. our fifth witness will be dr. leslie robinson who is an associate professor of business administration at dartmouth. our final witness will be mr. allan sloan. our thanks to all of you for
9:46 pm
coming. it is our custom that you're prepared statements will be made a part of the hearing record in their entirety. if you could use your five minutes to summarize it would be helpful. dino centers have many questions we will have some votes at 1045. this will be a bit of a juggling act. we will try to handle this as well as the chaotic senate schedule allows. so welcome. juggling act. we will try to handle this as well as the chaotic senate schedule allows. mr. stack, lcome. >> thank you. i appreciate the opportunity to appear today chairman wyden, ranking member hatch and distinguished members of the community. i appreciate the opportunity to appear to discuss these important international tax issues to which your committee has devoted substantial effort i'd like to begin by describing the work we're doing in the g-20 betts project and then link that
9:47 pm
discussion to consideration of the need for international tax reform, as well as measure, outlined in the administration fy-2015 budget proposals to address u.s. base stripping including through so-called inversion transactions. in june 2012 at the g-20 sum miss in los cabos, mexico, the leaders of the world's largest economies identified as a significant concern the ability of multinational companies reduce their tax bills in high-tax countries by shifting income into low and no-tax jurisdictions. the result was the g-20 oecd betts project. and the betts action plan endorsed by g-20 leaders last september in st. petersburg. the betts action plan outlines 15 specific areas where governments need to work to change the tax rules that encourage companies to shift their income at the expense of the tax base and our own tax base. the betts project is expected to
9:48 pm
release the first set of recommendations this fall and is set to conclude its work with final recommendations at the end of 2015. the united states has a great deal at stake in the betts project and a strong interest in its success. our active participation is crucial to protecting our own tax base by stripping by multinational companies. because the united states provides a foreign tax credit to u.s. companies for taxes they pay overseas, the united states also has a strong interest in rules that enjoy a broad international consensus. in addition, as home of some of the world's most successful and vibrant multinationals, we have a stake in insuring that companies play by tax rules that are clear and admin straitable and companies avoid time consuming expensive tax disputes. failure in the betts project could well result in countries taking unilateral inconsistent
9:49 pm
actions there be increasing double tax aches, the cost to the treasury and the number of expensed tax disputes. i'm happy to report that the ocd betts project has had a promising beginning and area where is work has been done to resolve gaps. i've outlined those in my submission. as the work moves to 2015 there is more that can be achieved and also several areas where we must build against bad outcomes. and echoing senator hatch, those outcomes would include international norms because they're vague and easily manipulated by tax authorities. or international norms that could erode the u.s. tax base or increase double taxation. the united states needs to remain deeply engaged in moving the betts project to a successful conclusion between now and the end of 2015. while the international discussion over betts are ongoing it's worth acknowledging steps the united states could take today to inform our own tax
9:50 pm
system to improve competitiveness, secure our tax base and reduce incentives for profit shift big u.s. firms. as the president has proposed, we should reform our business tax system by reducing the rate, broadening the base and imposing a minimum tax on foreign earnings but much would only be a start even with low rates, u.s. multinationals would continue to aggressively seek ways to lower the tax bills by shifting the income out of the united states. so what tools do we have at our disposal. the administration's 2015 budget contains a series of common sense proposals to protect our u.s. tax base which can be enacted as part of reform or in the contest of our current system. they're outlined in some detail in our budget and in my written testimony but let me highlight two here. one proposal would strengthen our interest stripping rules and level the playing field by eliminating the ability of u.s.
9:51 pm
subsidiaries by deducting a disproportionate of the united states. it is especially disconcertive to observe among the foreign multinationals that can most graefg civil take advantage of interests in the stripping rules are the inverted companies that is far and parented companies that were previously u.s.-parented. a second deal in the budget would deal with inversions. in secretary lew's letter to congress i want to underline the serious need for the united states to address the loss of federal tax revenue from corporate transactions and the need to redact our budget proposal or a similar one aimed at curbing them. once companies invert there is a permanent loss to the u.s. income base since it is safe to assume these companies are not coming back to the united states. these inversion tactics are on the increase.
9:52 pm
indeed we're wear of many more on the works now. it will worsen our fiscal challenges over the coming years and will reward countries that practice race to the bottom tax competition in an effort to lure away our large u.s. multinationals. as the secretary indicated in his june 15th letter, congress should pass antiinversion legislation immediately with an effective date of may 2014. thank you for the opportunity to speak to you today. i look forward to answering your questions. >> thank you very much, mr. stack. that's very helpful. our next witness will be mr. passqaul. >> thank you for the opportunity to testify here today. the industry was founded in the aftermath of world war i i and the leadership of the united states. it's a country-drive organization with 34 countries
9:53 pm
u.s. being the largest member and playing a key role. and it works by consensus. it does a lot of work on tax and in the tax area, we do consult extensively on the project related to project shifting we have consulted society, businesses or stakeholders. in this project, we have issued a number of discussion drafts, more than 3,500 pages of comments have been received and has been taken into account. we have conducted five public consultations as well as webcasts which have been looked at by more than 10,000 viewers. in the area of tax the oecd facilitating orchestration between tax and its countries to eliminate double taxation. taxation is at the core of each country free to set up its corporate tax system the way it chooses. but as a result, there are risks
9:54 pm
of double taxation which are not conducive to cross-border investments. since the 1920s, a common set of standards has been agreed and the oced has abated this work. in particular, we have have come up with a model transaction and guidelines. these rules have worked well, but they have also not kept pace with the economy changes. as a result, they have been good at eliminates double taxation, but they have also facilitated unintended double nontaxation. this is an issue for most governments across the world for many reasons. low tax itation in itself is not a problem. on the contrary, the oced favors low income tax and this is an issue for as long as countries decide to have corporate income tax, the korpgt income tax need
9:55 pm
to be paid by all taxpayers. and there is a need now to, one, make sure that the rules make sense. the current rules are redacted through organization and easy to gain through artificial settings. there is a divorce now between the location of the activity and the location of the profits which can be booked in a jurisdiction where absolutely nothing is happening. as a result, the sovereign right of countries is undermined. this is a global issue. this is not an issue targeted to u.s. companies. u.s. companies only account for less than a quarter of the fortune global 500 companies. so it's a global issue concerning u.s. and non-u.s. companies. second, there is a need to level the playing field. and an uneven playing field between companies is not conducive to the right relocation of capital. companies are at the domestic level are at a competitive
9:56 pm
disadvantage because they cannot use the loopholes in the international tax framework. three, there is a need to reduce uncertainty. uncertainty is bad for companies. is bad for investment climate. and there is increased uncertainty because of these rules not making a lot of sense. a number of tax administrations are planning to dispute the companies which is legal. and a number of companies are working away from the consensus, from the common interpretation of the rules and that results in uncoordinated unilateral measures to corporate tax base but that increases uncertainty. and, therefore, we need to address the serious risk for businesses. the response from governments has taken place in the context of the g-20 which has called to address the issue of base erosion and profit shifting. we have brought all the g-20 and the oecd countries on equal
9:57 pm
footing to find ways to address this issue of the tax framework by consensus, in two years' time so principles can be agreed quickly to reduce the risk of uncertainty. we need a principled approach and a cost-effective approach to eliminate the compliance for companies and reduce control. this is not a revenue exercise and should not be, but the useful exercise for the common principles to be more accepted by ensuring consistency in the cross-border environment, increasing such requirement and transparency. the objectives are to secure the consensus, thereafter, reduce uncertainty and improve the way we can solve disputes. we have come up with an action plan of 50 measures which i describe in my written testimony. some of them are about neutralize hybrid mismatches
9:58 pm
reducing tax or transfer rules. in clushgs i would say the issue of base erosion and profit sharing is widely shared. and here in the u.s. in particular, we are aware that you're planning to address the u.s. tax system. and we hope the work we're doing at the international level with your support and the engagement of the u.s. treasury can be useful to promote growth and jobs here in the u.s. by fixing some of the issues by the u.s. tax system. the work we hope is particularly timely and we hope it will inform you of your debate. we, of course, will be available to respond to your questions and further assist. >> thank you mr. saint-amans. let's go to dr. desai. >> i'm a professor of finance and a professor of law at harvard law school. recent merger transactions highlight long simmering
9:59 pm
problems with u.s. corporate tax particularly with respect to international provisions. my comments attempt to outline the origins, the range of alt tiff solutions guidelines for evaluating reforms and some reforms that should be avoided. the last 12 months witnessed remarkable wave. such transactions reflect the effects of policy, and the changes structure of multinational firms. from a policy perspective, the transactions highlight the increasing costs of employing a worldwide tax regime when other countries no longer retain such regimes. from a firm point of view, the transactions highlight the increased mobility of activity in today's economy. growing decentering of firms where world headquarters have been split up around the world. rather than question the royalties of executives it is critical to understand the
10:00 pm
underlying and secular forces. inversions are merely the most visible manifestation of these developments. in addition to inversions, these decisions are giving rise to entrepreneurs that anticipate. merger patterns that affect domiciles in the united states. profit shifting activities that are not value-creating and the subsequent negative impact on all the distortions on the u.s. labor force. while it's attempting to limit the more sensational effects and characterize them as paper shuffling this would be essentially missing the forest for the trees. it would be to focus on u.s. welfare with particular attention on reforms that would improve u.s. wages. these goals are mistakenly thought to achieve by lilting the foreign activities as foreign agentivities can be viewed as quartering activity away from the u.s. in fact, it suggests the


info Stream Only

Uploaded by TV Archive on